Monthly Archives: January 2020

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The SECURE Act contains quite a few changes that impact both individuals and business owners.

Two Key Changes For Individuals:

70-1/2 is out.

New Law Raises Age for RMDs from 70½ to 72: Under the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, if you turn 70½ years old on or after January 1, 2020, you are eligible for the law’s changes and generally must begin taking RMDs by April 1 of the year following the year that you turn age 72.

People who turned 70½ years old in 2019 are not eligible for the law’s changes and generally must begin withdrawing money by April 1, 2020

It’s eliminated for most beneficiaries of Traditional and Roth IRAs whose owners pass away in 2020 or later (Note: previous rules still apply to certain beneficiaries and to all inherited IRAs whose owners passed away before 2020). There are no mandatory annual distributions, but the entire inherited Traditional or Roth IRA balance must be withdrawn by the end of the tenth year.

There are some exclusions as well as other changes – talk with your financial or tax advisor.

Business Owners

There are a number of key changes for business owners, including

Expanded access to annuities within retirement plans in order to help retirees establish their own “pension” plans.

Retirement plan statements will be required to include a lifetime income disclosure at least once during any 12-month period

Multiple-Employer plan rules relaxed – this allows a number of unrelated businesses to set-up a plan with one provider/administrator in an effort to reduce costs – this will help small businesses most.

Of course, there’s more; but, this should give you an idea of why it will pay to work closely with your financial and tax advisors.

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER®professional and An Accredited Investment Fiduciary®in his 21st year of private practice as Founding Principal ofThe Independent Financial Group,a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742. IFG helps specializes in crafting wealth design strategies around life goals by using aproven planning processcoupled with a cost-conscious objective and non-conflicted risk management philosophy.

The Independent Financial Groupdoes not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Maybe the best kept secret in business succession for family-owned businesses.

Jim Lorenzen, CFP®, AIF®

According to the U.S. Census Bureau’s “Statistics of U.S. Businesses”, more than five million firms employ fewer than 20 employees.

Typically, small business owners are the active managers of their businesses, are heavily invested in their businesses, and generally rely on a small number of important accounts and suppliers. Also, in most, if not all, cases no secondary market exists for easy valuation and quick disposition of ownership. Succession often depends on a successful transfer to a key employee or family member while preserving and securing the retirement of the original owner.

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER®professional and An Accredited Investment Fiduciary®in his 21st year of private practice as Founding Principal ofThe Independent Financial Group,a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742. IFG helps specializes in crafting wealth design strategies around life goals by using aproven planning processcoupled with a cost-conscious objective and non-conflicted risk management philosophy.

The Independent Financial Groupdoes not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Few people think about this – and I wish I could be the smart guy that thought of this for this post, but I wasn’t[i]. It’s something called the widow’s penalty tax; it affects the surviving spouse.

After a spouse’s death, the survivor usually goes from a joint return to filing as a single filer, usually resulting in an increase in the survivor’s tax bracket. This happens because often the survivor’s income can be almost as much as they were filing when using a joint return – Bingo! – a large tax bill. One advisor’s client went from a 24% bracket (filing jointly) to a 32% bracket as the survivor[ii]

How to protect yourself?

A series of partial IRA conversions (to Roth IRAs) over several years, keeping the amounts low enough not to change your tax bracket, can help. Do this after age 59-1/2 but before taking Social Security benefits. The distributions will avoid the 10% penalty and, at the same time, take advantage of the low joint rate. By the way, it’s worth mentioning that the current tax law, which has lower brackets than prior law, sunsets in 2026, meaning brackets are set to return to their previous higher rates. Another benefit: the conversions will reduce your taxable income when you are forced to begin your required minimum distributions (RMDs) after age 70-1/2.

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER®professional and An Accredited Investment Fiduciary®in his 21st year of private practice as Founding Principal ofThe Independent Financial Group,a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742. IFG helps specializes in crafting wealth design strategies around life goals by using aproven planning processcoupled with a cost-conscious objective and non-conflicted risk management philosophy.

The Independent Financial Groupdoes not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.